Microsoft Reportedly Closes Ninja Theory Days After Senua Reveal

Microsoft is reportedly closing Ninja Theory, the Cambridge studio behind the Hellblade games, just days after the team premiered a new Senua game at the Xbox Games Showcase. A source who spoke with The Verge said the closure is happening, and staff are hoping a buyer will emerge before the studio shuts down. Bloomberg reports the studio is one of three Xbox-owned developers now negotiating to spin off.

Employees at the affected studios have been informed and given permission to seek new work, though Microsoft declined to comment and the status of the studios remains in flux. Even if a buyer emerges for Ninja Theory, many employees will still lose their jobs.

Microsoft Reportedly Plans to Close Ninja Theory

Ninja Theory is one of three Xbox-owned studios now negotiating to buy themselves back from Microsoft, according to Bloomberg. Compulsion Games, the Montreal studio behind South of Midnight, and Double Fine Productions in San Francisco are also in active talks to spin off as independent developers. All three have been told they are at risk of being shuttered.

Each studio represents a different stage of Microsoft’s acquisition strategy. Compulsion and Ninja Theory were both acquired in 2018; Double Fine came a year later in 2019. The Verge reports that staff at the affected studios have been given time to look for new opportunities. All three studios remain in talks with Microsoft over their fate.

Xbox has been considering spinning off its gaming division as a separate entity or restructuring it as a wholly owned subsidiary, GamesIndustry.biz reports, though no final decision on that larger question has been made. For now, the immediate story is three studios facing closure, with Ninja Theory’s name surfacing first. The Verge’s source said staff at the Cambridge studio are holding out for a buyer.

Just Days After Senua’s Reveal

Ninja Theory’s closure report lands just days after the studio premiered Senua, a new action-adventure game set in the Hellblade universe, during the Xbox Games Showcase. The reveal came on June 7, 2026, in a trailer that pitched a broader, more open take on the franchise. Studio head Dom Matthews told Xbox Wire the entire team of 85 creatives is working on the project for the first time in over a decade.

Matthews described the new game as an expansion of the Hellblade formula, with broader combat and a larger map. The map runs about twice the size of Hellblade II, and the combat now supports multiple enemies at once, vertical movement, and a wider weapon set. Senua gains a set of Focus Abilities that fold into traversal, puzzle solving, and combat. The story remains linear, told through a map built of interconnected locations that players traverse in a structured way.

In a June 7 interview, Matthews confirmed the studio had cancelled Project Mara, a previously announced experimental horror title, to bring the whole team onto Senua. The decision to redirect every creative to one project was meant to capitalize on the studio’s renewed capacity. Days after that interview, the studio itself is reported to be closing.

The new Senua takes the Hellblade universe in a different direction.

The title of just Senua really reflects that this is something fresh and new and different.

Dom Matthews, studio head at Ninja Theory, said this in a June 7 interview. The full interview on the new Senua game covers how the project started, why it isn’t called Hellblade III, and the new combat systems at the studio head’s full interview on Senua.

The 2018 Studio Wave Is Coming Due

Ninja Theory and Compulsion Games both joined Microsoft in 2018, the same wave that brought several smaller studios into the Xbox fold. Double Fine came a year later, in 2019. The 2018 purchases were framed at the time as a way to give the studios room to take creative swings without the pressure of commercial returns.

That arrangement is being unwound now. Last year, Microsoft closed The Initiative and cancelled Everwild, ZeniMax’s unannounced MMO, and Perfect Dark. The Activision Blizzard acquisition, which closed in 2023 at $69 billion, is the larger backdrop. It is the deal that made every other studio line item visible to a finance team that, by Sharma’s own memo, can no longer absorb the cost.

Each of the three studios now in talks with Xbox came out of a strategy that assumed creative output alone would justify the spend. The financial case for that strategy is the subject of an internal memo Sharma and Booty sent to staff on April 23, a memo that formally renamed the gaming team from ‘Microsoft Gaming’ to ‘XBOX’. The transformation Sharma and Booty outlined is now reaching the 2018 studio wave.

Sharma’s Reset, by the Numbers

Asha Sharma took over as Xbox’s chief executive in February 2026, replacing Phil Spencer, who retired after 38 years at Microsoft. In an April 23 staff memo published on Xbox Wire, she and content chief Matt Booty laid out the math behind the reset. ‘Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time,’ they wrote.

Microsoft’s most recent quarterly filing shows the pressure. Gaming revenue fell 7 percent to $5.3 billion in the quarter ended March 31, 2026, with Xbox hardware revenue down 33 percent on lower console sales and Xbox content and services revenue down 5 percent. The April memo also flagged a hardware component crisis. Component costs for the 2027 holiday season are expected to be over 5x the prices Microsoft paid only two years earlier, the memo said, with memory costs following a broadly similar trajectory.

Microsoft is also planning significant layoffs for July, just after the fiscal year closes on June 30, according to Bloomberg. The exact scale has not been confirmed, though a Giant Bomb episode cited a rumor of around 1,000 Xbox division cuts. Head of Xbox Game Studios Craig Duncan and chief of staff Louise O’Connor are also leaving, departures that arrived just ahead of the layoff cycle.

We have to be honest about where we are. We’re a challenger, and meeting this moment will require pace, energy, and a level of self-critique that should feel uncomfortable.

Asha Sharma and Matt Booty wrote this in the April 23 staff memo on the gaming reset. The same memo pegged the gaming business at about a 3 percent accountability margin and announced a 100-day reset.

• Over $20 billion in Xbox content, platform, and hardware subsidy spend over the past five years, excluding Activision Blizzard King
• $5.3 billion in gaming revenue for the quarter ended March 31, 2026, down 7 percent year over year
• About a 3 percent accountability margin Sharma projects for the gaming business at fiscal year end
• 33 percent year-over-year drop in Xbox hardware revenue in the March 2026 quarter
• Over 5x the cost of components Microsoft paid two years earlier, for the 2027 holiday season, per the April memo

What the Three Studios Have in Common

Compulsion, Double Fine, and Ninja Theory share a specific profile. All three are award-winning developers whose games did not break out commercially. Compulsion’s South of Midnight picked up Game of the Year at the Gayming Awards and Best New Intellectual Property at the BAFTA Awards 2026, while Double Fine released the smaller games Keeper and Kiln after the wide praise of Psychonauts 2, and Ninja Theory’s Hellblade and Hellblade II earned critical respect but not mass-market sales.

That mix of critical respect and limited commercial reach is the kind of return Sharma’s reset is asking studios to defend. Microsoft developed, then cancelled, a PlayStation 5 version of Gears of War in the same window where it committed Gears of War: E-Day and Clockwork Revolution to Xbox console exclusivity. Bloomberg reported that PS5 version was in development before the cancellation, which came ahead of the Games Showcase announcement. Most employees are expected to lose their jobs no matter how the spinoff talks resolve.

Microsoft is also reportedly considering spinning off Xbox as a wholly separate entity, though no final decision on that larger move has been announced. The studio-level talks are happening inside a corporate structure that is itself in motion. The July layoff plan is the financial backdrop to the studio-level talks, with the full timeline broken out in the July layoff plan timeline.

Where Senua Goes From Here

If Ninja Theory closes without a buyer, the decision about Senua falls to Microsoft. The studio had just redirected all 85 of its creatives onto a single action-adventure project and cancelled Project Mara to do it. The June 7 trailer is the only public footage of the new game. Sharma’s memo does not mention Senua or Hellblade, and Xbox’s stated focus is on extending the biggest franchises through the existing slate. Continuing a niche, narrative-driven action-adventure from a shuttered studio would not be a default choice.

Microsoft could hand the project to another internal studio, license the IP to an outside team, or shelve the franchise. Sharma has already shown she is willing to make sharp calls on exclusivity and platform strategy: she made Gears of War: E-Day and Clockwork Revolution Xbox console exclusives in her first 100 days, a strategy detailed in the new console exclusive strategy. The next 100 days of her reset are the window in which the Senua IP’s fate will be settled.

Frequently Asked Questions

Is Ninja Theory actually being shut down by Xbox?

Bloomberg and The Verge have both reported that the closure is in motion, with staff at the Cambridge studio holding out for a buyer that could keep the team together. Microsoft has not confirmed or denied the reports, and the status of the studio is still in flux per the same reporting. Employees at all three affected studios have been given permission to seek new work while the spinoff talks continue.

What was the new Senua game Ninja Theory announced?

Senua is a new action-adventure game set in the Hellblade universe, unveiled at the Xbox Games Showcase on June 7, 2026. In a June 7 Xbox Wire interview, studio head Dom Matthews described the game as a fresh direction for the series, with a map about twice the size of Hellblade II, expanded combat, and a full team of 85 creatives working on it together for the first time in over a decade.

Which other Xbox studios are at risk of closure?

Bloomberg reports that Compulsion Games, the Montreal developer of South of Midnight, and Double Fine Productions, the San Francisco developer of Psychonauts 2, are also in active negotiations to spin off as independent studios. The same reporting says several other Xbox-owned studios are in similar talks.

Why is Microsoft restructuring Xbox now?

Asha Sharma and Matt Booty wrote in an April 23, 2026 staff memo that Microsoft has spent more than $20 billion on gaming content, platform, and hardware subsidy over the past five years, while annual revenue has declined by nearly half a billion dollars. The gaming business is projected to end the fiscal year at about a 3 percent accountability margin. Microsoft is also facing a hardware component crisis, with component costs for 2027 expected to be over 5x what the company paid two years ago.

When will the Xbox layoffs happen?

Bloomberg reports that Microsoft is planning significant layoffs for July 2026, shortly after the company’s fiscal year closes on June 30. A Giant Bomb episode cited a rumor of around 1,000 Xbox division cuts. Microsoft has declined to comment on the scale of the cuts.